Ahrendts, 53, will oversee more than 400 retail outlets and
Apple’s online store, the Cupertino, California-based company
said today. Apple is tapping an executive who more than doubled
Burberry’s sales since 2006, rejuvenating the brand by expanding
in China, as well as embracing the Web and social media.

At Apple stores, started by co-founder Steve Jobs in 2001,
hundreds of millions of visitors a year test the latest iPhones
and iPads, giving it an advantage over Google Inc. (GOOG), Samsung
Electronics Co. (005930) and Microsoft Corp. (MSFT) Ahrendts’s tenure at
Burberry will be useful for Apple, which is facing the challenge
of growing outside the U.S. and maintaining its high-end appeal
as products become more mainstream.

“With iPhones being in more and more households, their
brand is more of a mass-market brand than it has ever been and
they can’t risk losing the aspirational aspect,” said Carolina Milanesi, an analyst at Gartner Inc.

Ahrendts will join Apple in the spring of 2014, reporting
to CEO Tim Cook. Apple, the world’s most valuable company, has
been without a full-time retail chief since last October, when
former retail head John Browett was ousted by Cook as part of a
broader management shakeup.

Transforming Burberry

In almost eight years at London-based Burberry, Ahrendts
extended a transformation started by her predecessor, Rose Marie Bravo, luring back higher-end customers who had been turned away
as its products became more commonplace. She embraced technology
by streaming fashion shows live on the Web, allowing customers
to order items online during the events. The shares have gained
in excess of threefold during her tenure.

“Ahrendts has always been incredibly focused on the
digital side of the business,” said John Guy, an analyst at
Berenberg bank in London. “If she was going to go anywhere from
Burberry, it would be to that area.”

Ahrendts, who previously worked as executive vice president
at New York-based Liz Claiborne Inc. and president of Donna
Karan International, joins Apple as it attempts to drive growth
by adding new customers outside the U.S. Under Ahrendts,
Burberry became one of the most successful luxury retailers in
China, a critical country for Apple after profit growth has
stalled, according to Milanesi.

“She knows how to do retail in China and what works
there,” Milanesi said.

‘Marketing Operation’

Ahrendts will be the 10th member of Apple’s executive team,
joining the likes of design guru Jonathan Ive and marketing head
Phil Schiller. J Crew Group Inc. CEO Mickey Drexler is on
Apple’s board.

Ahrendts’s compensation for the year ending March 31 was
valued at 3.26 million pounds ($5.2 million), according to
Burberry’s annual report. Apple executives dominate the list of
highest paid U.S. executives.

Christopher Bailey, who for the past six years has been
chief creative officer at Burberry, the largest British luxury-goods producer, will replace Ahrendts as CEO.

Burberry fell 7.6 percent, the biggest decline since
September 2012, to 1,464 pence at the close in London. Apple
rose less than 1 percent to $498.68 at the close in New York,
leaving the shares down 6.3 percent this year.

Shopping Experience

Apple’s stores earn more than high-end retail outlets like
Tiffany & Co. (TIF) and give the company a way to promote and teach
customers about its products. The company generated $4.1 billion
in revenue from its retail stores in the third quarter, with 84
million shoppers visiting its outlets.

Its first head of retail was Ron Johnson, who left in 2011
to become CEO of JC Penney Co. (JCP), a job he was later fired from
after disappointing sales.

“She is a terrific choice,” Johnson said in a statement.
“She is a creative and talented leader who will add value
throughout the company in addition to the retail efforts. She
will be exceptionally well received by the retail employees.”

Ahrendts’s experience overseeing a luxury brand is
especially important for Apple, said Benedict Evans, an analyst
with Enders Analysis in London. By contrast, Browett came from a
retail background more focused on cost savings that didn’t mesh
with Apple, he said. Cook had been overseeing the company’s
stores in the absence of a full-time executive.

“Apple stores are a self-funding marketing operation,”
Evans said. “She’s about delivering a great experience, with
the right economics.”

Earlier Cooperation

Ahrendts has long championed the integration of technology
and fashion. Burberry streamed a fashion show globally live last
month using Apple’s new iPhone 5s. She helped push Burberry to
team up with Twitter Inc. to stay on the cusp of technology by
posting backstage photos of a runway show on the social-networking service.

“You’re going to see relationships with technology across
anything that’s brand,” Ahrendts told Bloomberg Television last
month. “I don’t care if that’s in home or what you wear. I just
think it’s a new fact of life.”

As technological differences between smartphones become
less apparent to most customers, Apple’s marketing and retail
experience gives it an advantage over competitors, said Richard Windsor, an independent analyst with Radio Free Mobile.

“This is yet another move to strengthen the brand and
retail experience,” he said. “The technological edge seems to
be stabilizing and now Apple looks to be trying to differentiate
through its brand and the experience the consumer enjoys when he
or she walks through the door.”

This isn’t Apple’s first hire this year of a CEO of a
luxury clothing company. In July, Apple hired Paul Deneve, the
former CEO of luxury fashion house Yves St Laurent Group, to
work on special projects for Cook.

The addition of fashion-house expertise comes as Apple is
developing a wristwatch-like computing device, people familiar
with the work have said.